Connecticut Commentary: Red Notes from a Blue State

We cannot know yet what a Ned Lamont administration will be like. Fate is always a work in progress. But it seems a reasonable assumption that there will be Democrat Party continuity between the Malloy and Lamont administrations; both Lamont and Malloy are progressive Democrats. Lamont did stress during his campaign that he had run for governor against Malloy, but this was largely a feint for show. Nothing in the Lamont campaign suggests a policy break with Malloy. Moreover, the election results have returned Connecticut to the status quo ante as it existed during Malloy’s first campaign. Republicans had made some inroads to power during the Malloy administration. Prior to the November elections – a stunning victory for the majority party in Connecticut -- Republicans were at parity with Democrats in the Senate and trailing them by a few seats in the House. The election washed out these gains.

S&P Global Ratings has lowered Connecticut’s rating one notch from A+ to A. Credit analyst David Hitchcock provided a list of reasons justifying the downgrade. Hitchcock noted, according to a CTMirror story , that Connecticut has one of the highest per capita debt ratios in the nation, having ended the last fiscal year with a taxpayer bonded debt approaching 24 billion. The state has been struggling with ways to provide support for its poorly funded municipal teachers’ pension program. Connecticut, according to Hitchcock, “has a history of deficit financing during recessions.” Connecticut has yet to recover fully from a recession that official ended several years ago. The state’s emergency budget reserve is dangerously low at $210 million, according to Hitchcock, an amount just larger than 1 percent of annual General Fund operating costs. CTMirror reports that “Comptroller Kevin P. Lembo recommends a reserve of 15 percent.”

Milton Friedman once said, “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” If you put socialists in charge of countries, you soon will create shortages of toilet paper, which is the case in Venezuela, reduced to rubble by Hugo Chavez and his successor Nicolás Maduro. No one was surprised last week when Bloomberg announced that rich Venezuelans are fleeing the country – now an economic desert – for more profitable ventures elsewhere: “ Wealthy Venezuelans Are Seeking Haven in Madrid. " Something similar is happening in Connecticut. Tax money “invested” by Governor Dannel Malloy in Connecticut businesses is not working to create a welcoming business environment. “Once again, a Connecticut company making a major investment in its digital business has been lured by another state offering tax breaks and the chance to succeed in a big city,” the Hartford Courant tells us. This time it’s United Technologies (UTC)...

It’s more than a whisper. Hartford, Connecticut’s capital city, already is bankrupt; no one as yet has bothered to read the last rites over the corpse. The city’s formal announcement of bankruptcy can be deduced from the math, and there is no quarreling with math, as Mr. Micawber, a character in Charles Dickens’ David Copperfield , well knew: “"Annual income twenty pounds, annual expenditure nineteen pounds, nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

After paying court to Governor Dannel Malloy’s budget address, a eupeptic Republican noted that he sounded like Ronald Reagan. Another, unused to taking leaps of faith, said if only Mr. Malloy had done at the beginning of his term in office what he had said in his current budget address, we wouldn’t be in this fix. General Electric’s leave-taking may have served as a splash of cold water in Mr. Malloy’s face. Aetna, it appears, may be looking for an exit. Sikorsky has been sold, and other insurance companies, in part reacting to a failing Obamacare, are commingling in an effort to cut costs. More than a quarter of the total number of 893,851 active professional physicians reported by the Kaiser Family Foundation have now declined to participate in the new plans under the Affordable Care Act, a number of states have declined to set up exchanges, and UnitedHealth Group , the nation's largest health insurer, having lost more than $500 million on exchange plans, warned l...

The two most abhorrent but inescapable duties of politicians are: 1) selling themselves or their states to prospective investors, and 2) raising money for political campaigns. Connecticut politicians who do not like dunking for dollars hope to relieve themselves of the second chore through the public financing of campaigns. Whether or not the first is a disagreeable chore depends upon the individual politician and the condition of his product.

In February 2011, Aetna Insurance Company’s CEO, Mark Bertolini told a Middlesex County Chamber of Commerce breakfast group that Connecticut was not a profitable place to do business . “Connecticut,” said Mr. Bertolini, “falls very, very low on the list as an environment to locate employees . . . in large part because of the tax structure, the cost of living, which is now approaching, all in, the cost of locating an employee in New York City.” The Malloy administration quickly moved to shower Aetna with preferments, and Aetna’s honcho offered a weak apology, promising Mr. Malloy on a stack of bibles that his company would not hightail it to another state but continue to maintain its headquarters in Connecticut. He was grateful that Mr. Malloy, agitated by the possible loss of tax revenue, had opened Connecticut’s treasury to Aetna. Mr. Malloy in turn was grateful that Aetna would continue to remain in the spot, here to be plundered by tax starved government officials.

In any tousle between business and government, business usually has the last word, and more often than not the word is, “We’re outta here.” Sikorsky Aircraft, a Connecticut company of long standing, has initiated two rounds of job cuts. Early in 2010, Sikorsky President Jeff Pino, “under marching orders to raise the division's profits,” according to a news story , boasted to stock analysts, “We've nearly tripled the amount of direct production labor hours from 2006 to 2009. And for the first time in the history of our company, more than half of our hours are outside of Connecticut. We're very proud of that because outside of Connecticut, as I told you last year, by definition is low-cost sourcing." Having met his goal of a 10 percent profit margin in 2010, Pino presently is aiming for 14 percent by 2014. Playing its strategy close to its vests, company officials declined to share details of the cost saving cuts with Connecticut’s Democratic congressional delega...